IMPACT OF ESG SUBSET PERFORMANCE ON FINANCIAL AND MARKET OUTCOMES

This study examines the relationship between subsets of Environmental, Social, and Governance (ESG) performance measures and corporate financial and market-based performance. Utilizing regression analysis on longitudinal data spanning ten years from global car manufacturers, the findings reveal no significant relationship when considering composite ESG measures. However, further investigation into specific dependent and independent variables indicates a short-term significant negative effect of Environmental performance on financial performance, measured by Return on Assets (ROA). In contrast, a long-term significant positive effect on the market-based measure, Tobin's Q, is observed only within the Governance subset of the ESG score. These results underscore the critical role of governance in the automotive industry as reflected in our dataset.